WuXi stock plummets, wiping nearly $10B off market value as US adds it to ‘unverified’ list
As Covid-19 has made it more difficult for US regulators to carry out routine inspections, WuXi Biologics has been hit with unverified status, causing its stock to plummet, and wipe $9.9 billion off of its market value before trading of its shares was halted.
WuXi’s stock tumbled 26% in Hong Kong after the company was added to the US Department of Commerce’s unverified list. The companies on the list are hit with stricter import controls. WuXi is listed right on page 7 of the report, along with another 70-plus companies based in China. The listing means that it is unable to receive items subject to the export administration regulations, and exporters on the list must file an Automated Export System record.
This listing does not mean that the company has been blacklisted — an informal term for a list of companies that US investors are barred from owning shares in, or moving shares they already have — and the company made sure that was known in a statement it released Monday.
“We understand that the reason for this action is because U.S. government agencies have not been able to undertake required end-use verifications in order for certain equipment to be exported from US suppliers,” it said. “The ‘Unverified List’ is not the US ‘Entity List’ or ‘Black List’ that are more well known.”
WuXi has been importing hardware controllers for bioreactors and hollow fiber filters that are subject to US export control for the last 10 years and says that it has been in compliance with regulations ever since. But the Department of Commerce’s verification process has not been able to take place in the last two years thanks to Covid-19, and that is enough to land on the unverified list.
“This has no impact on our business or ongoing services to global partners. There is very minimal impact to our imports as no such equipment is required after facility construction in Shanghai and Wuxi,” the statement said. “We welcome inspection at any time for the clearance and removal from such list. We are also pursuing interim measures to remove these subsidiaries from the list prior to inspection.”
The stock slide comes as a bit of a return to Earth for the company that had experienced such strong success in response to the demand for Covid-19 vaccine manufacturing. A report from CPhI in November said that along with Lonza, Samsung and Fujifilm Diosynth Biotechnologies, WuXi would have the largest manufacturing capacity in the world by 2025, so long as trends continue in the same direction.
It also opened up a massive expansion at its Wuxi, China headquarters, adding an eighth drug production facility and the capacity to bring 60 million vials a year of commercial drug production. The 129,166-square-foot facility is called DP2 and has an isolator filling line for continuous production, which will eliminate cross-contamination.
In total, 33 Chinese companies have been added to the unverified list. DOC assistant secretary for export enforcement Matthew Axelrod said in a statement that the verification process is a core principle for the control system. The addition of those companies to the list “will assist U.S. exporters in conducting due diligence and assessing transaction risk, and signal to the PRC government the importance of their cooperation in scheduling end-use checks.”